6/4/2019 Morning Comments

Good Morning,

Rain in many parts of the Midwest and Plains this morning, almost none of which is welcome except for the drier areas of North Dakota.  The eastern corn belt continues to labor under excess moisture and will continue to do so the rest of the week with stray showers.  The Plains will also have its fair share of moisture in the coming week with 0.50-1.50” totals expected through the weekend for Kansas and Oklahoma.  The Delta and Mid-South will see moderate to heavy rainfall as well, delaying soybean planting.  Extended maps see no real change with moisture as above normal precip is the feature through the 8-14 day.  Temps cool to below normal in the 6-10 and 8-14 day, however.  At this stage, planting progress is in its final stretch so the weather focus now needs to shift to promoting growth instead of promoting seeding progress.

Sharply higher row crop markets overnight while wheat saw double digit losses early this morning before bouncing from the lows.  The planting progress numbers from yesterday afternoon were supportive, and with the calendar reading June 4, seem to be suggesting the narrative is set.  The U.S. Midwest just saw its worst planting campaign in modern history with the implications nowhere close to being known.  We’ve never had a crop planted so late, but on the other hand, we’ve also never put today’s seed genetics to the test in this way.  The market rally still has producers continuing to plant corn from South Dakota to Ohio where able, and we have a feeling this will persist until the drop-dead date on insurance.  Make no mistake, this corn crop will need ideal growing conditions with longest Indian Summer imaginable to hit trend or above yields.  Market bulls are not likely to even allow people to entertain the idea of a trend line yield even though we have no real idea where yield potential is at this point.  While demand on corn looks crummy at best, it will be the furthest thing from the market’s mind until we get through the key developmental weather in July and August.  Strap in for heightened volatility, extreme weather markets, an overload of forecast maps and the occasional trade war-headline.  This summer has the makings of one for the record books.  Corn open interest fell 17,317 contracts yesterday, soybeans were down 11,264, meal down 2,562, oil down 8,227 contracts, SRW down 963 and HRW down 3,803.

Weekly crop progress showed corn planting at 67% complete nationally vs. 71% expected, 58% last week, 96% last year and 96% average.  SD, IL, IN, OH and MI all remain under 50% planted which is truly remarkable considering the date on the calendar.  Even more impressive in our opinion is the fact we are only 46% emerged in the first week of June with South Dakota sporting just 13% emergence, Illinois 32%, Indiana 18%, Ohio 18% and Michigan 17%.    There is absolutely nothing to compare to in terms of yield potential, Growing Degree Units, relative maturity ranks, etc. for a crop which isn’t out of the ground in the first week of June.  Soybean planting isn’t much better at 39% planted nationally vs. 42% expected, 29% last week and 79% average.  Similar totals for the trouble states of SD/IL/IN/OH/MI.  Only 19% of the soybean crop is emerged nationally vs. 56% average.  Spring wheat planting progress is wrapping up with 93% planted nationally vs. 93% expected, 84% last week and 96% average.  South Dakota is 86% planted at two weeks passed its final plant date for full insurance coverage.  For most states, what is planted is what we are going to get.

On the condition front, a little bit of optimism.  Spring wheat conditions started the year at 83% good/excellent, the highest initial ranking for this week since 2010 and among the five highest on record.  Despite the fact the crop is behind average maturity, it does look good where emergence has scooted along.  With the forecast calling for above normal precip and below normal temps, one could call that wheat growing weather.  Winter wheat conditions bounced back nationally at 64% G/E vs. 61% G/E a week ago and estimates for a slight decline.  Conditions declined sharply in Oklahoma again this week, down 9pts to 64% G/E due to excessive rainfall.  This will probably persist next week as well as more rain is forecast for the state.  Kansas conditions bounced back, however, and will be interesting to see if they maintain high ratings next week given the forecast and concerns over quality and protein.  The national winter wheat crop is also the highest for this week on the calendar since 2010.  National winter wheat heading progress is called 76% complete vs. 66% last week and 84% average.  The southern plains winter wheat crop is 2-3 weeks behind schedule but commercials are content with the amount of blending stock for any quality issues which do arise.  That said, protein premiums are likely to strengthen while discounts get more severe for sub-12% HRW.

The April oilseed and grain crushings report was released yesterday afternoon as well with supportive data shown.  April soybean crush was reported at 171.6mbu vs. the average trade guess of 170.0mbu and was unchanged from a year ago.  This tied last year’s record, and put marketing year crush back on the right track after two sub-par months in February and March.  Marketing-year-to-date crush now points toward May-August crush needing to run essentially unchanged the rest of the year to hit the USDA’s current estimate.  This is achievable in our opinion considering the copious amount of soybeans in the country as well as the fact board crush margins are above $1.25 through October.  April corn for ethanol usage was reported at 440.5mbu, almost unchanged from March’s 440.1mbu and slightly under last year’s 445.3mbu.  Marketing year-to-date corn grind for ethanol at 3.549bbu is down 4.3% from a year ago while the USDA’s estimate is calling for just a 2.2% reduction from a year ago.  Without a pickup in production, this should result in a further reduction on subsequent reports.

Bottom Line: Hard to see bulls giving ground now that they are armed with a crop progress report which suggest we will never get anywhere close to the March Prospective Plantings report.  Wheat has recovered nicely off the lows but is behaving in a rational manner considering the U.S. wheat crops are highly rated and have plenty of excess bushels to contribute to the corn feed demand picture.  Spec shorts remain largest in soybeans and Minneapolis wheat should the group decide to wholesale exit their short exposure.  Unlikely we will see peak volatility for another 6-8 weeks when pollination weather really ramps up.  We need ideal conditions the rest of the way which is not unprecedented, simply unlikely to be the case for the entire belt.  Strap in.  It’s going to be a bumpy ride.

Good Luck Today.

Tregg Cronin

Market Analyst




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